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Interview with Maria Cirino

As a co-founder and Managing Director of .406 Ventures, Maria brings 23 years of entrepreneurial, operating and senior management sales and marketing experience in venture-backed technology companies, with particular strengths in IT security and technology driven services (e.g. managed services, SAAS etc.). As such, Maria focuses on investments in the IT Infrastructure, IT Security, and digital media sectors. She is actively involved as an investor and board member in Adtuitive, Bit9, Digitalsmiths, Kaltura, Memento and Veracode. Prior to founding .406, she was Senior Vice President of VeriSign, following its 2005 $142 million acquisition of Guardent – a Sequoia, Charles River Ventures and NEA-backed IT security company that Maria co-founded, led as Chief Executive Officer and Chairman, and for which she received “Massachusetts CEO of the Year” and Ernst & Young “Entrepreneur of the Year” awards. Prior to Guardent, she was Senior Vice President for sales and marketing at i-Cube, an IT services company, which was acquired by Razorfish in 1999 for $1.8 billion. From 1993 to 1997, she was responsible for North American sales at Shiva, the category creating remote access company.
A noted expert in information security, Maria was named one of the top 25 women in Information Security by Information Security Magazine, inducted by Women’s Business Magazine into the “Women’s Business Hall of Fame,” and recognized by Upside Magazine’s “Women to Watch in Technology.” She holds a BA in English from Mount Holyoke College, where she is a Trustee emerita and where she currently serves on the Investment Committee.

Transcript:

Lucy Sanders: Hi this is Lucy Sanders, the CEO for the National Center for Women and Information Technology, or NCWIT. This is the next segment in our entrepreneurial toolbox series. This is a series of interviews with really fabulous entrepreneurs, about topics interesting to other entrepreneurs. All the way from networking, and failing for the first time. To the topic we have at hand today. Which is forming ,and getting along with, and learning from all types of boards. Advisory boards, boards of directors, etc., and we have a great person we are talking to today. Maria Cirino. She is the cofounder and managing director of .406 Ventures and she is going to tell listeners where that name came from in just a moment. But she has a great technology background, a successful entrepreneur, a serial entrepreneur I might add, many companies and she has been on many boards and she is currently on many boards. For example, Bit9, Digitalsmiths, Kaltura, Veracode -chairman of that board. So lots of experience with boards, and Maria we are very happy to have you with us today to tell us about that.

Maria Cirino: My pleasure Lucy.

Lucy: So we really wanted to first of all, now since I hinted at this, tell us where the name of your venture company came from, .406?

Maria: Sure. So we are a Boston based venture capital firm, focusing on early stage technology investments. When we thought, when we were just forming the firm, and we though about what we wanted our name to be. We wanted to have a strong Boston flavor, and we wanted it to be metaphorically connected to the business that we are in. We actually asked our founding associate, to go off on a Friday and not come back to work on Monday. Until she came back with a list of names that might fit that criteria, and .406 Ventures was on the top of that list. One of the reason we like it is that numbers precede letters, so we are typically on the top of any of us. [laughter] .

Maria: And when we dug into it and then understood the story a little bit, there was a famous Red Sox Boston player Ted Williams. Who batted 406 as a batting average in 1941, and that has not been beaten since that time by any professional baseball player. The reason that Ted was able to achieve such a high batting average, and one that has not been beaten to this day, is that he had extraordinary vision. So his eyesight was really tremendous. And he had taken the time over the years to analyze, where within the strike zone, he could hit that. That analysis led him to be very selective about which pitches he would swing at. He would only swing at a certain segment of the strike zone. He would not swing at anything that came within the whole strike zone. So we though that that measure of selectivity, you know, was a great metaphor for this business because while see probably upper to the 800 very talented entrepreneurs every year, we invest in about half a dozen of those. So it is business that demands that level of selectivity, and we thought it was a terrific metaphor, and we were all Red Sox fans here in the firm. And that is how we got our name. And the URL was available, probably most importantly. [laughter] .

Lucy: Well you know, it is a great name and we have interviewed a number of people with great names for their companies, this is probably one of my favorite names. I also wanted to take a moment before we get into the interview and say who is with me today as a part of the interview. Larry Nelson w3w3.com. Hi Larry, welcome.

Lucy: Well, so we thought lets just get right to the questions about boards. So Maria, tell us a little bit about your background and how it was you came into this investment overall.

Maria: Well, I have a fairly unusual background. I gradated from a small liberal arts college near here Massachusetts, Mount Holyoke college back in 1985. With a degree in English literature. So that neither qualified me for the entrepreneurial and operational career in high tech that I enjoyed for about 23 years prior to going into the investing side of the business. Nor did it qualify me for my current job, but I am a big proponent in liberal arts education. I think it helps you think, it teaches you how to think and teaches you how to solve problems. So literally happened to look into my first assignment, which was helping a guy franchise computer, and software retail stores back in 1985. By the way Lee, you get a kick out of this. It was in that year that I met Scott Cook for the first time who was flying himself around, he is the founder of Intuit, flying himself around in Cessna 172 airplane trying to sell his brand new product which at that time was Quicken.

Lucy: Wow!

Maria: So I spent a few years doing that. Then was recruited by one of our large [indecipherable 04:55] manufacturing companies called Lotus club in Boston. Spent a couple of years there, and then did a series of start ups. From there Shiva company called I-cube Razorfish, started a company called Garden. It was a managed Security Company. Sold that to VeriSign, came out of there and started another security company, which is in our portfolio today Veracode. So, just sort of a series of right place, right time. Worked with a lot of these people before and so people sort of would call up and say 'hey I met this company, I met this company, you have got a company with an incredible team'. So very, very lucky and fortuitous career, doing mostly early stage high-tech companies.

Maria: How that led to 406 interestingly enough, was I was coming out of VeriSign, and started out Vericode. I was being recruited by these firms who wanted me to sit on their board, wanted me to help evaluate deals. I did that with a couple of different firms and then started getting recruited as 'hey! Come join us full time. You know, expanding the partnership. I think true to my entrepreneurial roots, when you have an opportunity to join something. You take a step back, and you think about -should I join something, or should I start something? And talked to a few investors who like to help to start new venture firms and it seemed a few years ago, like a good time to do that. So that is how 406 came to be.

Lucy: So Maria, can you tell us and our audience how you see the role in importance of an advisory board and a board of directors?

Maria: Yeah so I think both are really critical, especially to early stage companies. Of course boards of directors are very critical to even later stage companies, and especially public companies -because they cannot really function without them. But think early on, and I'll really direct my comments more to the early stage companies, and how they can help. I mean an advisory board can do many, many things for a company. One, it can you know, help you gain a perspective that you might not have represented in the management team or even on the board. If your venture backed company typically your board members are mostly comprised of partners in the firms that have put up the capital for your business. If you are very lucky, you will be able to bring in one or two independent directors, who you have probably tapped, because they bring an expertise or experience that maybe is not represented from your financial investors. But your advisory board, I think, really gives you much more flexibility. When I was running companies, I would typically look for an advisory board to help us with go-to market issues. And so people who had strong backgrounds in sales and marketing in the particular areas, industries, business models that were important to our company that we were trying to operate within. Then I would also look to compliment our own engineering, and operations and technical experts by having a technical advisory board as well, and being able to tap into people who, potentially, we couldn't hire because they were either gainfully employed elsewhere or didn't want to leave their jobs, but had a lot to offer and we were able to tap into them from time to time. Usually, a couple of times a year, we would bring that group together and serve up a range of topics just to get their input, and ideas and expertise on it. And what I found was that by sort of managing two distinct groups, we were able to get a ton of value. The groups themselves got a lot of value from each other because they enjoyed sharing ideas and information with other members of those boards. Not only did it give the company, I think, excellent advice, guidance but it also gave us a lot of visibility. Oftentimes, we would be able to recruit people to advisory boards who really didn't have the time. Maybe they were running companies or CEOs of big companies, they liked what we were doing, but they certainly didn't have the time to devote to monthly board meetings as we were expecting of our board of directors. The advisory boards weren't that type of time commitment. So we were able to recruit some fairly high-profile people and those became marketing events for the company as well. So I think we always thought of our advisory board as serving a very important internal purpose, but also serving an external purpose and made sure that we leveraged the opportunity to help build the company's brand through the series of illustrious advisors that we were fortunate enough to bring on.

Larry: Yeah. I'm very much a believer in advisory boards also. Could you go back a little bit in time and tell us how you put together your first advisory board?

Maria: Sure. At the time, I had started a company in the information security space, which seemed like a great idea back in 2000. Obviously, a lot of security issues were new to the world. In fact, only back in late '99, early 2000 could you not have a strong background in information security, which I did not have, and actually go and get funding from three prominent venture capital firms to go start a company in the information security space. And because the founding team didn't have that representative in our DNA, we felt the first thing we needed to do was go put together an advisory board of people that had very strong information security backgrounds from the government, from industry, and really make that a prominent part of our go-to market and really listen to these folks. We thought we were terrific operational folks and we could execute, but we knew we needed to have guidance and the credibility that a terrific group of senior advisors coming out of the information security space would be able to bring us. So that's what we did, and we were able to find some very prominent folks, as I said, out of government agencies as well as industry. And they did help us shape our product offerings, our service offerings. We made a major strategy shift early on that I'll credit our advisory board with really helping guide us to that decision. And it was absolutely critical, I will say, because the company's early credibility and having people view us as an exciting, new but a very real and serious player on the information security scene.

Lucy: Not all things go well with boards, we know. I'm sure our listeners -- some may have stories about interactions with boards that they'd rather forget. What do you think some of the most common mistakes that entrepreneurs can make would be when they're selecting boards or interacting with their boards?

Maria: I think it's all about setting expectations on the one hand, and then making sure that you take the time to do your homework, get to know the people you're recruiting, spend some time, do your homework, get some references, understand and talk with people who they have had board experiences with those folks before. And then make sure you set the appropriate expectations with those individuals in terms of how often you expect them to either attend meetings, or teleconferences or that sort of thing. Make sure that expectations are very clearly spelled out. There's typically some renumeration for these board members for early stage private companies that's often in the form of stock compensation equity for larger public companies. There's often almost always a cash component involved in that as well. Typically, the cash component is not part of an early stage company's board compensation or advisory board compensation because, of course, every penny counts and is needed to help build that business into a profitable entity. But I would say that the biggest mistakes that I've seen is when expectations haven't been clearly laid out or when people maybe get star struck by a name and a title, and rush into a decision without taking the time to have a couple of meetings, get to know that individual, make sure that individual is who you think they are and is going to provide the value that you hope they're going to provide. And vice versa. I think you want to make sure that that person understands the business that you're building, is passionate about it, wants to contribute to it and is going to have the time to meet the requirements that you're setting out, and that they want to work with you.

Lucy: So as a follow up, real fast, if you get yourself in a bad situation, you say, "I'm the CEO of a start-up company, early-stage company, and I get myself into a bad situation, " what do I do to get out of it?

Maria: The best way to do things, I think, is you have an agreement that you should have your attorneys come up with so that as you are culminating the relationship, you basically hand over -- and it should be a pretty simple one couple page type agreement that basically says, "You're agreeing to join our advisory board. You understand the expectations of us, so this term is a one-year renewable contract." We're big proponents in one-year renewables because then if it's not working on either side, you don't have to live with it forever. So we encourage most of our early-stage companies to do that. Either side can elect not to renew it and it doesn't live on for a longer period of time. Obviously, for later-stage companies, public companies, those terms are usually a little bit longer, generally two to three years, shareholders are voting on whether or not board members are being renewed. But for early-stage companies, we typically say make these things one-year renewable and then if it's not working out, it's not working out.

Lucy: And in a start up, one year can be painfully long.

Maria: And I guess my remarks there are really more along the lines of advisory board than board. Your financial investors, you don't get to basically renew those contracts every year.

Lucy: You've got those guys.

Maria: Those board seats come along with the capital that you've taken. So my advice to you or to entrepreneurs in that situation is really do your homework in terms of the firm that you're taking money from, in terms of that partner. Go talk to entrepreneurs who that partner has worked with previously; both the ones on the reference list and probably most importantly the ones off the reference list. The single most important question that we encourage entrepreneurs to ask about us or any other VC of entrepreneurs that have worked with that individual before is, "Would you take money from that individual again?"

Lucy: Interesting.

Lee: Interesting.

Maria: Was that a value added experience? Of course you're going to have disagreements. Were disagreements handled directly and respectfully and constructively? So if you're only able to ask one question the question to ask is, "Would you take money from that person again?"

Lucy: So the company now has their board of directors, you're getting ready for a board meeting. Can you give us any tips when you were CEO on how you prepared for these board meetings?

Maria: Yes, I think you know first and foremost, I think again early on, you want to make sure that everybody's expectations are in line. And so early on I proposed a board meeting format, you know a board presentation format, engaged, the early board, in terms of how this board should sort of grow, and over time and what that should look like. Engaged the board in, you know OK we have two independent director slots here's the profile of the individual I'm thinking of for that, and you know it could take six months to bring this person on, it could take three months but I don't want to rush it I want to get the right person. I assume that you all will want to meet that person. I would love for you to do that. So I think the more open, collaborative and prescriptive you can be in terms of how you want to manage your board, the types of communications that you're planning and get feedback. So after the first meeting call every single one of them and say, "Oh, how'd that go? I'm looking for some feedback. You know where could the meeting have been you know more productive? Did the materials give you the right information? You know what more would you need?" So I think you know those first few meetings are really critical, really polling the group and sort of saying, "Hey how can we make these things even better and more effective?" Is it the right amount of time? Is it too much time? Is it not enough time? You know materials, too much? Not enough, etc., etc.? Ask for examples of "What do you consider to be best practices in this area from the companies who manage board meetings best in your portfolio? What do those packets look like? Can you send me one that's redacted? You know so that you're not sharing any confidential information but give me an idea, give me a template." And I think good firms are more than willing to help companies get off the right foot on that. Why reinvent the wheel when we all do have certain ideas of this is a good board packet, this is a lacking board packet. And I guess the most important thing also is, send the information out a couple of days in advance to give your board members time to read it. Because your board members can't be as effective as you want them to be and you'll wind up getting frustrated with questions that you think they shouldn't be asking 'cause they already read the answers in the materials if you haven't given them enough time to read the materials.

Larry: Well that makes sense. Now another thing I'd like to help us define a little bit is there's a difference between an inside director and an independent director. What's the difference and what's important about them?

Maria: Sure. Well, and as I touched on a little bit earlier, I mean very often your inside director, I believe the way this term is being used is either somebody that comes along with the capital, right, so it's a general partner in a firm, you know that becomes a director because of the capital that's gone in, or it can be a designated management director seat. So often, almost always, right, the CEO is going to have a seat at the board, you know that would be considered to be an inside director. You know an independent director on the other hand is somebody not necessarily attached to the firm that has or the firms that have put capital into the company. They are not and should not be attached to an employee or a member of the management team. They should be somebody who's completely independent who both the board and the management team agree because of their experience, their expertise, their background, their, you know what they've done previously, is going to bring you know something to this board that is additive to you know what's already represented by the management and by the investors in the room. For instance if you are building a company that's going to selling most of its products to financial services companies at the CIO level to actually have on your board as an independent director, somebody who is currently or has been a CIO at a large financial services company would be a really smart thing to do. You'll have a voice of the customer there, somebody basically to say, "I understand you're heading in this direction but it seems to me you haven't really thought this through and here are a few objections you might hear, " or "Hey you guys are completely on the right track and you know if you were to call me up tomorrow in my you know in my current or past capacity you know, I would be a huge fan." So I mean I think that that type of firsthand market experience can be very, very effective coming from an independent director.

Lucy: Well that's a good distinction to know because I know there are some cases where independent directors have a real voice at that table. You know, so that's great to know the difference. So is there anything that we haven't asked you about boards that you think entrepreneurs should know?

Maria: I think you put together a pretty good list. You know the one thing that I stressed earlier that often doesn't get asked but you already asked it is you know, "How can you avoid getting yourself into a bad situation?" I'd say, "Do your homework up front and go and find entrepreneurs that might not be on that VC's reference list and find out why." If they had a bad experience, really try to understand that and understand why that was. Sometimes it's personality clash but you know sometimes it's philosophies that might not mesh from the beginning and so you know I think the more homework you can do up front the better off you'll be. And then again, just be as transparent as you can and really solicit ideas and advice early on to try to get things off on the right foot. And then I think, you know boards in my experience respect strong senior executives who aren't afraid to push back when they feel like the board is trying to control the meeting or the company. And remind everybody that you know the board's role is not to run the company. The board's role is to advise the company, the board's role is to assist the company, the board's role is to provide oversight to that management team and ultimately to hire and fire the CEO. But beyond that, if the board is trying to get into the weeds, you know a good strong senior executive will point that out in a constructive way and remind the board that they need them to be focused on these higher level areas and not the day to day issues.

Lucy: Well, and that's a great closing thought, you know. The board doesn't run the company and good executives know that and good board members know that. And I think that that's a great thought. So Maria, thanks very much for joining us. This was very exciting to talk to you and to learn more about boards. Very, very important to early stage companies as well as more mature companies and heck even the non-profits like us.

Larry: Absolutely.

Lucy: So thank you very much. I want to remind listeners where they can find this podcast at W3W3 dot com and see what, dot org and we really want to thank you for your time.